This isn't about net neutrality and doesn't really have anything to do with Netflix except that they are a Level 3 customer. It's a peering disagreement between Comcast and Level 3 and it's far from clear that Comcast is in the wrong here.- jim 11-30-2010 9:37 pm

My point is I am a monopoly customer--I can't get faster net with Verizon. They should be trying to get me the best deals on all services, instead of favoring their crap in my name.- tom moody 11-30-2010 11:56 pm

Maybe we need a national telecommunications infrastructure. I would be in favor of that. Monopoly or even duopoly ISP service in many markets is a real problem. My point is just that trade regulation or net neutrality legislation is not going to fix this particular issue. Level 3 is sending a gigantic amount of data over Comcast's network for free because they have agreed to exchange equal amounts of traffic without charge (i.e., they have a peering agreement.) Comcast is pointing out that the recent levels of traffic coming from Level 3 is way more than Comcast is pushing back over Level 3's network in the opposite direction - so according to their agreement Level 3 should pay more. This is exactly what Level 3 recently did to Cogent when a similar situation arose. I think the idea now spreading through the media that Comcast is doing this primarily to freeze out Netflix and boost their own video on demand offerings is getting a little ahead of the facts (although it makes for a nice OMG! headline for newspapers). No doubt Comcast would like to boost their video on demand sales, but I think that's a minor point compared to the traffic disparity generated by Level 3s decision to sell really cheap transit to people like Netflix and then just assume other networks will carry the traffic free of charge (in a way Level 3 certainly wouldn't as evidenced by their de-peering threats against Cogent.)

But I'm not arguing against what I think is your main point (Comcast shouldn't have a monopoly on internet access in your market?) It's just that short of nationalizing the internet backbone, I'm not sure there is anything to do about it except to let these companies fight out their peering issues like is happening here. So far it's worked well. Level 3 and Cogent worked it out. And I think Level 3 and Comcast will work it out (although probably by agreeing on some way to pass the cost on to the end user.)

That we have monopoly internet access in many markets is a different issue, one that I'd also like to see addressed.- jim 12-01-2010 12:16 am

I have tried to hold off forming an opinion. The above article makes Comcast's actions look better than my first impression.

Netflix is pretty sucky with my ATT internet (3 Mbps, but not really). It will probably be usable with Comcast as an ISP (12 Mbps allegedly). I'll know the answer if they ever get around to connecting me. I won't buy their cable service. The level of artifacts hurts my visual cortex.- mark 12-01-2010 6:24 pm

Comcast has their own set of specs and battery of tests for cable modems beyond UL, FCC and DOCSIS, Zoom claims Comcast is squelching Zoom's access to the market with arbitrary barriers to Zoom's modems.- mark 12-01-2010 9:16 pm

In determining the values of the two parties' peering ebbs and flows, I'd say Comcast has an advantage because it owns the wires to people's homes and the billing infrastructure that allows them to raise rates indiscriminately, unfairly, and often. Level 3 has businesses that use its "backbone" with whom fair market contracts must be arrived at. From where I'm sitting it should have the right to effectively charge Comcast more, because Comcast has a license to print money. (I watched my tv + internet go up in 2 and 3 dollar increments every year, while the quality of the TV went down (analog channels were gradually being taken offline over the same period). The monthly bill eventually reached $98 (from around $85) and I canceled the TV. Internet alone is $60 and I am on a Netflix trial for $7.99. So I really don't want to hear that Netflix is going up to $10 because Comcast used access to me as a bargaining chip. They steal quite enough as it is.

I do think these issues could be resolved by more effective regulation, including the peering contracts. It's not just a matter of the market finding its right level.- tom moody 12-02-2010 10:50 pm

I agree that markets don't work with monopolies or duopolies. Without an "efficient market", basic services like water, garbage pickup and telecom should have regulatory protection for consumers and businesses which interact with monopolies.

Also, too, regulated utilities are a good part of a balanced investment portfolio.- mark 12-03-2010 12:28 am

Here's an interesting post that's pretty close to how I feel. I'm not against regulation, but we don't want regulation that gets us something worse than where we are right now. And it's hard for me to see how net neutrality regulation (the way I've heard people sketch out possible solutions) is going to work.

- jim 12-03-2010 2:46 pm

I hear you. For the record dave mentioned neutrality, I said trade regulation (as in antitrust). Neutrality for me is more an issue of not squelching the voiceless (as with a de facto "slow lane" for indie bloggers), as opposed to one big company's "rights" vis a vis another big company's, or my complaints about paying more for Netflix.- tom moody 12-05-2010 11:21 am

The other pothole to watch out for is the resentment that may build from Netflix subscribers who don't stream. More than two-thirds of the company's customers stream at least a little, but what about the other 34%?

They had no reason to complain when streaming was added, because it came at no additional cost. Now that Netflix is going through with its first rate hike since 2004, the "stream nots" may not be as happy as they used to be in subsidizing the streamers.

"Creating the best user experience that we can around watching instantly is how we're spending the vast majority of our time and resources," Netflix explains in this morning's announcement. "Because of this, we are not creating any plans that are focused solely on DVDs by mail."

In other words, get on the bandwidth bandwagon, stream-nots -- or suck up the subsidization.

- bill 12-05-2010 1:17 pm

According to the USPS, the rate hike would boost the cost of shipping most packages by 5.6 percent on average. But the increase varies depending upon what’s being shipped: The agency is proposing an eight percent increase for mailing periodicals, a 23 percent increase for standard mail parcels and a seven percent increase for media or library mail. The latter is the category that Netflix would most likely fall into.

A seven percent increase might not sound like a lot, but it could have a severe impact on Netflix’s business. While DVD-by-mail is not growing as quickly as Netflix’s streaming video service, it still accounts for the majority of the firm’s cost of goods sold (COGS). According to a presentation on the company’s job site, Netflix expects its COGS to be $1.4 billion in 2010, with more than half of that going towards postage and handling. With the DVD rental firm spending more than $700 million on postage and handling a year, a little back-of-the-envelope math suggests that its postage costs could increase by $50 million if the USPS proposal goes through.

That’s bad news for Netflix, as increased postage costs will eat into the company’s earnings next year. For fiscal 2009, Netflix earned $115.9 million, or $1.98 per share, and it expects to earn between $132 million and $144 million for the full year 2010.

One variable that this doesn’t take into account is the postal service’s plan to cut Saturday service delivery. As part of its cost reduction plan, USPS expects to move from a six-day delivery schedule per week to five days, a move it says could lower overall costs by more than $3 billion in the first year implemented. With a decreased delivery schedule, Netflix could see the number of DVDs it ships decrease slightly, but it’s not clear how that would affect its overall costs.

- bill 12-05-2010 1:29 pm

There are some powerful forces at play technology/commerce side of things. There's a value chain from producers to consumers:

Everyone in the middle is either complacent (& dumb) or scared shitless. One of the things that scares them is unbundling. If people just pay for the stuff they want to watch, the amount they're willing to pay for those few things is considerably less than what they pay for aggregated service.

One of the advantages held by some of the aggregators is that they own the physical network. They reserve the majority of that physical network for their own product, and provide a relatively small amount for the wild, wild internet.

So any restrictions they successfully place on internet traffic further tighten their control of the small percentage of the network that is not already inside their walled garden.- mark 12-06-2010 7:20 am

I'm happy so far to be a cable co's worst nightmare, saying goodbye to their crappy TV packages and hunting and gathering in the wild. I just watched Godard's Pierrot Le Fou on Netflix on a 1920 x 1080, 21 inch monitor, and the full deployment of the original widescreen composition was stunning.
This is probably the time and place to note that govt regulation is, ahem, potentially problematic given "regulatory capture," govt collusion with "rights monopolies," and the Wikilieaks witchhunts of the moment.- tom moody 12-06-2010 1:55 pm